Great draw of China

Film Finance Forum East 2012

Rather than predicting a bursting bubble, executives involved in the booming China movie business see a rational business taking form, according to panelists at the Film Finance Forum East presented by Winston Baker in association with Variety at the Toronto festival.

Several cite the fact that serious money is being paid for video-on-demand rights.

Marc Schipper, chief operating officer at Exclusive Media, says rival Chinese VOD outfits surfaced at the 2010 American Film Market, paying tens of thousands of dollars for Hollywood films and by 2011 prices leapt to six figures. He adds that Western films getting the promotional boost from Chinese theatrical release can fetch well above the $150,000-$250,000 that is the current price range.

China’s movie business is driven by theatrical — its box office is expected to top $3 billion this year, and despite the rise in price for VOD, TV rights remain miniscule in China.

While there is opportunity in the country, it has its quirks.

“Long contracts sometimes aren’t appreciated,” says Forum panelist Maarten Melchior, international representative of the film and TV division of financial services outfit Fintage House, which handles film contract collections and disbursements for film companies.

“The Chinese will ask, ‘Why do you have to spell out every possible issue that may or may not happen.’ They figure it’ll be resolved anyway because you are doing business with people you trust.”

Schipper says it is ultimately the people who understand the culture and get along with Chinese partners who will be successful: “You cannot do anything without the right Chinese partners.”

Of course, local partners can help foreigners navigate the constraints of Chinese regulations and censorship rules, which includes a ban on depicting police corruption, or ghost stories.

While most Western indies focus on movies, Screen Capital Intl. is investing in theaters as part of a strategy that starts with building brick-and-mortar cinemas in the underscreened territory.

“It’s our view it’s more efficient to build a base of theaters in which you can establish an in-theater advertising business, then a distribution business and finally a production business,” says Clint Kisker, director of media industries investor Screen Capital Intl. “It can be seen as a path into Chinese entertainment infrastructure from reverse angle than the more commonly way to start with co-production model.”

Screen Capital opened its first Chinese cinema in February in partnership with Red Carpet Cinemas, which has plans to build 50 theaters in underscreened areas.